Blackstone Group To Bypass Banks, Looks to Hedge, Mutual Funds for Loans

Blackstone Group LP, manager of the world's biggest private-equity fund, plans to bypass Wall Street firms and directly find lenders for leveraged buyouts, the president of the company, Hamilton James, said.

The firm is contacting hedge funds and mutual funds to provide loans for takeovers, Mr. James said after a panel discussion yesterday at the Super Return conference in Munich. Other firms may follow New York-based Blackstone's lead, he added.

"We're bypassing the banks," Mr. James said. "There's still ultimately demand for this paper out there if you can go directly to the buyers."

The move may cut fees for Wall Street firms led by JPMorgan Chase & Co., which earned $412 million last year arranging loans for buyouts, according to data compiled by Freeman & Co. and Thomson Financial. Banks are trying to cut a $230 billion backlog of debt they agreed to provide, making them less willing to back new buyouts.